TIDMAVCT
RNS Number : 6120S
Avacta Group PLC
04 October 2017
For immediate release
4 October 2017
Avacta Group plc
("Avacta" or "the Group" or "the Company")
Preliminary Results for the Year Ending 31 July 2017
Further significant progress in the Affimer therapeutics
programmes
Commercial traction for Affimer reagents building and multiple
licenses agreed
Avacta Group plc (AIM: AVCT), the developer of Affimer(R)
biotherapeutics and reagents, is pleased to announce its unaudited
preliminary results for the year ending 31 July 2017.
Operating Highlights
Affimer Therapeutics
-- Significant de-risking of the broader Affimer biotherapeutic opportunity
-- Discovery programme delivering a pipeline of Affimers to important immuno-oncology targets
-- Excellent progress in lead immuno-oncology programme (PD-L1
inhibitor): Programme remains on track to be ready for first-in-man
clinical trials in 2019
-- Partnership with Moderna expanded to include more drug targets
-- Collaboration signed with Sloan Kettering Cancer Center to
show potential of Affimer based CAR-T therapies: reporting H1
2018
-- Collaboration with Glythera established to demonstrate
suitability of Affimers as the targeting molecule in drug
conjugates: reporting H2 2017
Affimer Research and Diagnostics Reagents
-- Strong growth in pipeline of paid-for Affimer technology
evaluations with order book up 91% YOY. Focus on licensing
opportunities with pharma, biotech, diagnostic and reagents
companies
-- Evaluations now beginning to deliver licensing agreements and
repeat business that will underpin medium and long term revenue
growth
Financial Highlights
-- Group revenues increase 26% to GBP2.74m (2016: GBP2.17m)
-- Avacta Life Sciences revenue GBP1.15m (2016: GBP0.70m), in line with market expectations
-- Avacta Animal Health revenue GBP1.59m (2016: GBP1.46m)
-- Loss from continuing operations GBP6.37m (2016: GBP4.65m)
-- Loss per share increased to 9.31p (2016: 6.86p)
-- Cash balances at GBP13.17m (2016: GBP19.52m) well ahead of market expectations
-- Net assets as at 31 July 2017 GBP29.89m (2016: GBP35.86m)
Other Highlights
-- Affimer intellectual property portfolio expanded
-- Two new facilities completed in Wetherby and Cambridge totaling around 20,000 sq ft
Dr Alastair Smith, Avacta Group Chief Executive Officer,
commented:
"The past twelve months have been an exceptionally strong period
of performance and we have never been more excited about the
potential for the Affimer technology.
The commercial traction for Affimer reagents has continued to
build which is reflected in the strong growth in the number of
technology evaluations and license deals that have been agreed. The
first license deal with a global diagnostics company represents a
significant milestone and we are confident of delivering further
license deals which are key steps on the path to building a
profitable Affimer reagents business.
Major milestones that have been delivered in the past year
include the positive outcome of the first animal efficacy data and
excellent results from a major immunogenicity trial on human
samples. The pipeline of immuno-oncology assets now includes
Affimers for T-cell recruitment and co-stimulatory receptor
agonists which plays to the key technical strengths of the Affimer
technology for immuno-oncology. The progress with the lead PD-L1
inhibitor programme, and the overall de-risking of the Affimer
therapeutic platform, has been outstanding.
These technical successes have, as expected, generated growing
interest from potential partners and we continue to work with them
providing data and supporting technology evaluations that will
eventually lead to licensing deals.
Antibodies have become the dominant technology in markets worth
in excess of $100 billion annually and this is despite some
significant limitations. The opportunity therefore, for a
competitive alternative such as the Affimer technology, is very
large.
We believe that 2018 could be a very significant year for the
Group and I look forward to further updating the market on future
progress."
For further information from Avacta Group plc, please
contact:
Avacta Group plc Tel: +44 (0)
Alastair Smith, Chief Executive 844 414 0452
Officer www.avacta.com
Tony Gardiner, Chief Financial
Officer
finnCap Ltd Tel: +44 (0)
Geoff Nash / Giles Rolls - Nominated 207 220 0500
Adviser www.finncap.com
Tim Redfern / Nikita Jain - Corporate
Broking
Tel: +44 (0)
WG Partners 203 705 9318
Nigel Birks / Nigel Barnes Tel: +44 (0)
David Wilson / Claes Spang 203 705 9317
www.wgpartners.co.uk
Yellow Jersey (Financial Media Tel: +44 (0)7764
and IR) 947137
Sarah Hollins avacta@yellowjerseypr.com
Zyme Communications (Trade and Tel: +44 (0)7787
Regional Media) 502 947
Katie Odgaard katie.odgaard@zymecommunications.com
To see the research report produced by Capital Network that
analyses our preliminary results, please click on the link
below:
Link to report: https://goo.gl/dpPeV2
About Avacta Group plc (www.avacta.com)
Avacta's principal focus is on its proprietary Affimer(R)
technology which is a novel engineered alternative to antibodies
that has wide application in Life Sciences for diagnostics,
therapeutics and general research and development.
Antibodies dominate markets worth in excess of $50bn despite
their shortcomings. Affimer technology has been designed to address
many of these negative performance issues, principally; the time
taken to generate new antibodies, the reliance on an animal's
immune response, poor specificity in many cases, and batch to batch
variability. Affimer technology is based on a small protein that
can be quickly generated to bind with high specificity and affinity
to a wide range of protein targets.
Avacta has a pre-clinical biotech development programme with an
in-house focus on immuno-oncology and bleeding disorders as well as
partnered development programmes. Avacta is commercialising
non-therapeutic Affimer reagents through licensing to developers of
life sciences research tools and diagnostics.
Chairman and Chief Executive Officer's Statement
Overview
2017 has been a year of excellent technical and commercial
progress for Affimer(R) research and diagnostic reagents together
with substantial de-risking of the Affimer technology as a
therapeutic platform.
Major steps forward have been taken with the substantial
de-risking of the Affimer technology as a therapeutic platform
through the excellent results from a large immunogenicity trial on
human samples and through the first demonstration of efficacy in an
animal model. The ongoing Affimer drug discovery programme is also
delivering a pipeline of valuable Affimer binders to other
important immuno-oncology targets that will be developed both
in-house and through licensing.
In our lead immuno-oncology programme (a PD-L1 blocker) we are
well on the way towards selecting a candidate Affimer to go into
detailed pre-clinical studies. This progress keeps the company on
track to be ready to begin first-in-man trials of an Affimer
therapeutic in 2019 - a major milestone for the technology and
Company.
The research partnership with Moderna has expanded to include
more drug targets and the collaborations with Memorial Sloan
Kettering Cancer Center and Glythera continue to progress towards
important proof-of-concept data for Affimer based CAR-T therapy and
drug conjugates that will create opportunities to license the
Affimer technology for these applications.
The progress in the Group's therapeutic programme is also
mirrored by strong commercial progress of the reagents business
unit. There has been strong growth in the pipeline of paid-for
Affimer technology evaluations for research and diagnostics
applications with the order book up 91% YOY, including a growing
number of repeat customers. These evaluations are now beginning to
deliver licensing agreements and repeat business that will underpin
medium and long-term revenue growth including the first license for
development agreed with one of the top three global diagnostics
companies.
Critical to delivering commercial license deals for both
therapeutic and non-therapeutic applications is data demonstrating
the benefits of Affimers compared with antibodies that will support
significant licensing terms. The generation of these data in a wide
range of application areas is the focus of the Group's activities
in the near term.
Outlook
Antibodies have become the dominant technology in markets worth
in excess of $100 billion annually and this is despite some
significant limitations. The opportunity therefore, for a
competitive alternative such as the Affimer technology, is very
large.
Avacta is generating revenues and aims to build a profitable
business unit over the medium term in the minimally regulated,
low-risk life sciences research tools and diagnostics markets, and
to deliver to shareholders a significant upside from its Affimer
drug pipeline. The Group has made substantial technical and
commercial progress towards these key strategic goals during the
past twelve months.
We are very excited by the potential of the Affimer technology
and look to the future with confidence of further technical and
commercial progress.
Trevor Nicholls Alastair Smith
Non-executive Chairman Chief Executive Officer
3 October 2017 3 October 2017
Chief Executive's Review
Introduction to Avacta
Affimer Technology
An Affimer molecule is a small protein that is capable of
binding to and capturing a target molecule (such as another
protein, a peptide or a small molecule) in the same way that an
antibody does. This ability to capture or bind a target molecule
can then be used to detect or quantify it in a diagnostic test or
research assay, or to enrich or purify it from a complex mixture,
for example. If the target is involved in a disease pathway and the
binding by the Affimer molecule activates, alters or blocks its
function, then there is potential for the Affimer molecule to
provide therapeutic benefit as a drug.
Antibodies are proteins that have evolved as part of the immune
system to bind to a target in vivo. Over several decades this
property of antibodies has been harnessed to develop thousands of
reagents for laboratory assays and diagnostic tests, and one third
of all drugs in development are now antibodies. This enormous
success of antibodies is despite some significant limitations:
-- antibodies are often not specific to the target and
cross-react with other targets causing uncertainty in the results
that are obtained;
-- antibodies are large proteins with complex structures
including special internal bonds and external chemical
modifications that are required for correct function making many of
them challenging and costly to manufacture and resulting in batch
to batch variability;
-- antibodies are often generated by immunising an animal and
purifying the antibodies from the animal's blood which means that
the time required to develop a new, high quality antibody can be
many months and that the type of target to which an antibody can be
raised is limited to those that are not toxic and cause an immune
response; many important and commercially valuable targets do not
fit these criteria;
-- the large size of antibodies is a disadvantage in some
applications in which, for example, tissue penetration is
important, or a high density on a sensor surface is required;
and
-- many applications require the antibody to be modified to
carry a payload or signaling tag and their large size and complex
structure makes these modifications more challenging.
In contrast, the small size and simple structure of Affimer
molecules means that they are easy to manufacture with simple, low
cost processes that are reliable in their batch-to-batch
consistency. Their simplicity also means that modifying an Affimer
molecule for a particular application is easily carried out with
simple biochemistry. New Affimer molecules are generated by
screening through a pre-existing large library of approximately ten
billion Affimer molecules to identify those that bind to the target
of interest. This utilises an industry standard in-vitro process
which does not use animals and therefore it is quick, taking a
matter of weeks, and circumvents some limitations arising from the
nature of the target.
This screening process can also be finely controlled to maximise
the specificity and optimise other properties of the Affimer
molecules that are pulled out of the library for a particular
application. Affimer molecules are ten times smaller than
antibodies and very stable, being resistant to extremes of pH and
temperature, which makes them better suited to some applications
where harsh conditions are experienced or where the small size
leads to better sample penetration or a higher density of binding
sites on a surface. Their small size and ease with which they can
be modified means that the amount of time a therapeutic Affimer
molecule stays in the blood stream can be tailored to suit
different therapeutics regimes.
Despite the limitations outlined above, antibodies have become
the dominant technology in markets worth in excess of $100 billion
annually. The opportunity therefore, for an alternative such as the
Affimer technology, is very large with the potential to generate
near-term revenue from minimally regulated, low-risk life sciences
research tools and diagnostics applications, as well as potentially
generating much higher rewards from therapeutics but with
associated greater development risk.
Affimer Business Model and Strategy
Avacta is addressing both therapeutic and non-therapeutic
opportunities for Affimer technology. The Group is focused on
building a profitable business through licensing of Affimer
reagents to research tools and diagnostics developers to power
their products, whilst developing a pipeline of Affimer therapeutic
candidates for in-house development and licensing.
Affimer Research and Diagnostics Reagents Business Review
Avacta has chosen to focus initially on three large application
areas where Affimers have clear technical benefits over antibodies
as research and diagnostics reagents. Those are: immunoassays,
separations and rapid diagnostics.
The Group has also adopted a licensing business model and in
order to secure licensing deals for Affimer reagents to build a
longer term royalty based revenue stream we provide custom Affimers
on a fee-for-service basis to allow the potential licensee to
evaluate Affimers specific to their target in their application. In
addition, the Group undertakes in-house R&D to generate
technical marketing data demonstrating the benefits of Affimer
reagents in various applications to support business development
activities.
During the reporting period, significant progress has been made
both in building the pipeline of evaluations, which is reflected in
an increase in custom Affimer order book of 91% YOY, and in
generating the data packs that support business development.
Examples of the evaluations that are ongoing are:
-- A large North American bioprocessing company is evaluating
Affimer reagents that will allow them to separate therapeutic
products from complex biological samples without cross-reacting
against similar products in the samples. Affimers have been
generated that are specific to the products of interest and do not
cross react with other products. These Affimers have been assessed
at small scale by the partner who is now scaling up the process for
further evaluation.
-- A global consumer test developer is evaluating Affimer
reagents for point-of-care testing to make an existing consumer
test more specific, sensitive and user friendly in the read-out
format. Affimers have been identified that bind the target
requested by the third party that convert the assay into the more
user-friendly format. The evaluation of the Affimer reagents in the
rapid diagnostic is ongoing.
Importantly, this pipeline of evaluations, that has been
building for over a year, is now beginning to deliver licensing
agreements and repeat business that will underpin medium and
long-term revenue growth. A major milestone was achieved during the
reporting period in that the first license for development was
agreed with one of the top three global diagnostics companies. This
followed successful evaluation of multiple Affimers which were
developed to capture a particular marker of disease in blood whilst
not cross-reacting with other markers to which existing antibodies
do cross-react. This work should lead to a wider relationship with
this larger global diagnostics company as well as the potential
commercial exploitation of the licensed Affimers.
More than ten Affimer R&D licenses have been agreed
following successful custom Affimer projects which allow the third
party to use the Affimers generated for in-house R&D in assays
to support clinical studies for example, or enabling new R&D
experiments to be carried out, and repeat business is being
generated.
Further evidence of the rapidly building momentum can be seen in
the number of recent scientific publications from third parties
using Affimers which in the past twelve months totals seven, double
the number in the previous twelve months. These scientific papers
include a wide range of imaging applications, biosensors and
diagnostics and they have a very positive contribution to building
awareness of the Affimer technology across the life sciences
market.
With clear commercial traction established and momentum
building, the key objectives for the Affimer reagents business unit
in order to build a profitable revenue stream are:
-- Conversion of evaluations into license deals that will ultimately lead to royalty revenue;
-- Growing the evaluations pipeline and repeat custom Affimer business;
-- Generation of technical marketing data supporting the
business development efforts and opening up new applications
outside of the three initial focus areas.
Affimer Therapeutics Development Review
Avacta has chosen to focus its investment in therapeutics in the
area of immuno-oncology (IO) due to the intense commercial interest
in IO assets at the present time and because certain technical
benefits of the Affimer technology make it highly competitive as an
IO therapeutic platform.
IO harnesses the power of the patient's own immune system to
attack the cancer. The approach relies on the fact that tumour
cells have certain proteins on their surface that can be used for
targeting therapies, or can be blocked or stimulated to create an
immune attack.
The two key technical benefits of the Affimer technology
compared with antibodies which will allow the Group to develop
differentiated and commercially valuable medicines in the IO space
are:
-- Affimer proteins are easily connected together to form
dimers, trimers and higher order multimers and, crucially, these
multimers are still easy to produce and process.
-- Affimer proteins are small, robust and easily produced by cells and tissues.
Avacta's therapeutic development strategy is based around
delivering three medium term objectives:
-- Progress the first Affimer into the clinic to demonstrate safety and tolerability in man.
-- Build a pipeline of commercially valuable therapeutic Affimers for partnering.
-- Secure further partnering/licensing deals.
In order to meet the first objective and progress an Affimer
into the clinic as quickly as possible the Group decided to select
a drug target that was relatively well known and therefore
presented lower risk in terms of the target biology. The immune
checkpoint PD-L1 was selected for this purpose.
Partnering/licensing deals will be secured based on having
Affimer proteins with beneficial clinical effects and having
substantial data packs to support the valuations of those assets.
The strategy to build the pipeline is to leverage the key technical
benefits of Affimers listed above to create assets that are
differentiated from antibody and other technologies. The strategy
may be summarised as follows:
-- Since Affimers are good for creating multimers, the Group has
chosen to focus its in-house development programmes in two areas
that require multimers: T-cell recruitment and agonism.
-- Since Affimers are small, robust and easily produced by cells
and tissues the Company has worked to secure collaborations in gene
delivery, CAR-T and drug conjugates where these properties are key
benefits. In order to keep resources focused on in-house programme
milestones, Affimer proteins that are being developed for the
in-house programme are being used where possible for these
collaborations.
AVA-004 PD-L1 Programme Update
There has been excellent progress during the reporting period in
the lead immuno-oncology programme - a PD-L1 inhibitor. PD-L1
(Programmed Death Ligand 1) is an immune-checkpoint protein that
appears on the surface of a tumour cell to "fool" the immune system
into "thinking" that the tumour cell is a healthy cell and should
be left alone. By blocking the PD-L1 on the surface of a tumour
cell, the cell cannot "hide" from the immune system which will then
attack it as an aberrant cell.
The Group has now generated multiple Affimer PD-L1 inhibitors
and formatted them to create therapeutic molecules that remain in
the blood stream for long enough to have a therapeutic effect.
During the reporting period, the efficacy of an Affimer PD-L1
inhibitor was demonstrated in an animal model showing a reduction
in tumour growth rate comparable with the benchmarking antibody
that was used in the study. This is the first time that the
efficacy of an Affimer has been demonstrated in vivo and as such is
a major technical milestone for the technology. It shows that the
Affimer remained functional in vivo, and was available in the serum
for long enough to have a clinical effect and that it had the
desired clinical effect. The study also went on to show that the
biological effect of the Affimer antagonist was observed as
expected, i.e. there was an increase in certain immune system cells
in the environment of the tumour comparable again with the
biological effects of the benchmarking antibody.
A lead Affimer inhibitor of PD-L1 has now been selected for
further development during 2018 which includes further in vivo
studies and manufacturing development with the objective of being
ready for the first-in-man clinical trial beginning in 2019.
Affimer Technology Development Update
Excellent progress has been made in expanding the pre-clinical
dataset that demonstrates the performance benefits of Affimer
technology and answers key questions that significantly de-risk the
broader Affimer biotherapeutic opportunity.
A second major development milestone for the technology was
achieved during the reporting period with the excellent results of
the first major immunogenicity trial on human samples. This trial,
which used human peripheral blood mononuclear cells in a standard
industry trial format, showed that the basic Affimer technology was
not immunogenic i.e. did not produce an unwanted immune response
from human cells. This is a significant de-risking of the Affimer
platform in the eyes of potential large pharma partners and
collaborators.
As mentioned above, the first animal efficacy data for an
Affimer was generated which showed that the Affimer therapeutics
(in this case a PD-L1 inhibitor) had the pharmacokinetic profile
(time spent in the blood stream) and was functional in vivo to
produce a clinical effect of reducing the tumour growth rate in a
CT26 syngeneic tumour model. This was the first demonstration of an
Affimer having a clinical effect in an animal and is another major
step in de-risking the technology from the perspective of potential
licensees. The Affimers for this study were generated,
characterized, put into an animal model and the data analysed in
only nine months. This very rapid time scale from discovery to
animal efficacy data is a major advantage of the technology
compared with antibodies and other non-antibody technologies.
A range of different formats (ways of combining Affimer
molecules with each other and with other proteins) have been
produced and the production yields of several important therapeutic
Affimer formats have been confirmed.
The serum half life (time spent by the molecule in the blood
stream after injection) is a critical factor in the success of a
therapeutic. Small proteins like Affimers are below the renal
cut-off and are therefore cleared from the blood stream by the
kidneys into the urine very quickly. In many therapeutic
applications in which the drug is delivered systemically (by
injection) the result of this is that the drug does not spend
enough time in the blood stream for a clinically relevant dose to
reach the site of action. The serum half-life must therefore be
extended in some way and it is essential to demonstrate that this
can be done with a new platform technology such as Affimer
proteins.
The Group has shown that by formatting Affimer proteins
(attaching them to a larger protein such as the Fc region of an
antibody) an acceptable serum half-life can be obtained. It is also
highly beneficial to be able to tailor the half-life within a range
and in order to do this the therapeutic Affimer is "piggy-backed"
on a large protein in the blood (serum albumin) but attached only
weakly so that it drops off the serum albumin when the therapeutic
Affimer engages with its target. The serum half-life extension
produced by this "piggy backing" can be tailored by controlling how
tightly it binds to the serum albumin.
The Group has therefore initiated a programme to generate serum
albumin binding Affimers and has successfully generated a range of
Affimers with different affinities for this target which are now
going into pharmacokinetic studies to measure the effects on serum
half-life.
Pipeline Update
Avacta has an ongoing drug discovery programme delivering a
pipeline of Affimer proteins that bind to other important IO
targets. The pipeline development strategy is based on the key
technical benefits of
Affimer technology as described above and focuses on T-cell
recruitment and agonism.
CD3e (T-cell targeting) and CD19 (tumour targeting) are the
primary T-cell recruitment programmes and are in the early
discovery phase. Selections are also beginning with other tumour
targets (CD22, 5T4) to facilitate the development of dual targeting
T-cell recruiters in the longer term.
Affimer selections have begun with two agonist targets (CD27 and
GITR) and Affimer binders have been generated to a second immune
checkpoint (LAG3) which can be combined with PD-L1 in a bispecific
format.
A number of other Affimer binders to other IO targets have been
generated to demonstrate the speed and broad applicability of the
Affimer platform.
Partnerships Update
In 2015 Avacta entered into a collaboration, licensing and
option agreement with Moderna Therapeutics.
Under the terms of the agreement, Moderna made an upfront
payment of $500,000 which provides them with exclusive access to
Affimer molecules that bind certain targets which may be extended
to include additional targets by a further payment. Moderna is also
making certain payments to Avacta for research services to deliver
pre-clinical development milestones.
Moderna has the option to enter into exclusive license
agreements for selected therapeutic Affimer candidates for clinical
development and in each case Avacta will be entitled to milestone
payments. The total value of these payments could reach several
tens of millions of dollars. Avacta is also entitled to royalties
in connection with future product sales.
The Group is limited by confidentiality in what it can say about
the progress within the Moderna collaboration but the programme is
progressing well and, during the reporting period, expanded to
include more drug targets.
Avacta Animal Health Review
Business and strategy
Our strategy is to provide vets, directly and through partner
laboratories, with solutions that enable them to diagnose and treat
companion animals more effectively. Avacta Animal Health has an
established specialism in allergy diagnostics, a growing expertise
in the use of data in diagnostics and ongoing developments in
antimicrobial resistance.
To do this we develop, manufacture or source, then market and
support diagnostic solutions and related treatments. We work
closely with leading experts in academia and industry (Key Opinion
Leaders or "KOLs") and aim to present vets with well researched and
evidenced tools that enable faster and more reliable decisions in
practice.
Competitive strengths
Our aim is to be different to our competitors in a number of
ways, each presenting value to our customers: -
-- we develop and manufacture most of our own products allowing
us to provide the highest level of insight and support
-- we add to established services to provide a more complete solution
-- we provide especially strong frontline customer service, with
in-house veterinary support and specialist KOL assistance
-- we have an innovative and well-resourced research and development team, and
-- we have access to proprietary Avacta Life Sciences technology.
Market focus
Our customers are companion animal vets and the laboratories
serving them. We listen to their feedback through surveys, our
sales and customer services teams and our Veterinary Advisory
Board.
We are privileged to work with Jason Atherton, Laura Playforth,
Mark Dunning and Kirsten Pantenburg as our Veterinary Advisory
Board members and they help to inform our development and
commercial choices.
Our partner laboratories serve much of Continental Europe as
well as parts of the Asian market and the US.
Development focus
Our development priorities are increasingly set by market
feedback and then driven by our R&D team towards new assays,
algorithms or delivery methods. We involve and work closely
alongside industry KOLs from the UK and the US to ensure our work
is based upon the latest and best research available.
During this financial year our immediate development efforts
have been increasingly focused on allergy and this has led to
additional offerings, launched in September. We now offer a more
complete allergy service supporting vets through much of their work
up process.
Long term development ambitions are to deliver more data-led
innovations and to provide one or more point of care tests that
help achieve the appropriate use of antibiotic treatments.
Financial Review
Revenue
Reported Group revenues grew to GBP2.74 million, an increase of
26% (2016: GBP2.17 million). Revenues for the Affimers business,
Avacta Life Sciences, increased to GBP1.15 million (2016: GBP0.70
million) as the number of custom Affimer projects increased.
Revenues in Avacta Animal Health increased to GBP1.59 million
(2016: GBP1.46 million) as a result of growing sales from
pet/equine allergy tests.
Research and development costs
During the year the Group expensed through the income statement
GBP2.60 million (2016: GBP1.50 million) in relation to research and
development costs. Within the amount expensed, GBP1.94 million
(2016: GBP0.93 million) relates to the costs associated with the
in-house Affimer therapeutic programme which, in-line with other
therapeutics based companies, are expensed given their pre-clinical
stage of development. In addition, an amortisation charge of
GBP0.57 million (2016: GBP0.57 million) has been recognised against
previously capitalised development costs from the custom Affimer
reagents and diagnostics programme and new Animal Health allergy
tests.
Furthermore, development costs amounting to GBP1.41 million
(2016: GBP1.73 million) were capitalised within intangible
assets.
Administrative expenses
Administrative expenses have increased during the year to
GBP7.18 million (2016: GBP5.43 million) as the scale of the Affimer
business operations continued to increase, with full year costs of
the increased development, production and sales teams. Depreciation
increased to GBP0.93 million (2016: GBP0.60 million) following the
completion of the new laboratory facilities in Cambridge and
Wetherby at the end of the prior year.
Losses before taxation
Losses before taxation from continuing operations for the year
were GBP7.89 million (2016: GBP5.57 million).
Taxation
The Group claims each year for research and development tax
credits and, since it is loss-making, elects to surrender these tax
credits for a cash rebate. The amount included within the
consolidated income statement in respect of amounts received and
receivable for the surrender of research and development
expenditure was GBP1.53 million (2016: GBP0.92 million). The Group
has not recognised any tax assets in respect of trading losses
arising in the current financial year or accumulated losses in
previous financial years.
Cash Flow
The Group reported cash and short-term deposit balances of
GBP13.17 million at 31 July 2017 (2016: GBP19.52 million).
Operating cash outflows from operations amounted to GBP4.24
million (2016: GBP4.23 million). Within the net operating cash
outflows there were cash receipts in respect of research and
development tax credits amounting to GBP1.75 million (2016: GBP0.57
million) which represented tax refunds for the 2015 and 2016
financial years.
During the year capital expenditure of GBP0.66 million (2016:
GBP2.86 million) was significantly lower than the prior year when
the new facilities at the Cambridge and Wetherby sites were
completed.
Financial position
Net assets as at 31 July 2017 have reduced to GBP29.89 million
(2016: GBP35.86 million) as a result of the losses incurred during
the year of GBP6.37 million and the corresponding reduction in cash
and short-term deposits.
Events since the end of the financial year
There are no events to report which have occurred since the end
of the financial year.
Principal Risks and Uncertainties
The principal risks and uncertainties which could have a
significant impact on the Group are set out below:
Research and development
The Group's research and development activities are focused
around the Affimer technology within the reagent, diagnostic and
therapeutic areas.
There is a risk, consistent with similar biotechnology companies
developing new and innovative technology platforms that the
scientists involved are unable to produce the results required for
their internal development programmes or customer related
projects.
The development teams continue to work on improving the core
Affimer technology platform, with oversight from the Senior
Management Team and Scientific Advisory Board.
Timing
There is a risk that the development of the Affimer technology
may take longer than planned to meet the requirements of current
and potential customers.
Given the proprietary nature of the Affimer technology and its
early stage development, it may take some time for customers to
evaluate and utilise the technology instead of more established
antibody technologies. This could delay the completion of
commercial licences for the technology and the resultant revenues
from these licences.
Intellectual property
The success of the Group's Affimer technology platform depends
on its ability to obtain and maintain patent protection for its
proprietary technology.
Failure to protect the Affimer technology platform, or to obtain
patent protection with a scope that is sufficiently wide, could
significantly impact the ability to commercialise the
technology.
Should the patents be challenged, there could be a considerable
cost in defending the patent rights, with an uncertain outcome.
The Board regularly review the patent portfolio and its
protection. Specialist patent attorneys are engaged to apply for
and defend intellectual property rights in appropriate
territories.
Funding
The development of the Group's Affimer technology, in particular
in the therapeutic areas, is resource and cash intensive.
As at 31 July 2017 the Group had cash and short-term deposits of
GBP13.17 million which would provide sufficient funds over the next
18 - 24 months to continue the current programmes.
Should the Group decide to accelerate the Affimer platform
development programme into additional therapeutic areas to increase
shareholder value then further funding would need to be raised. As
with all fundraising activities there are external market and
economic factors which may impact the timing and amount of funding
available.
Key staff
The Group has in place an experienced and motivated senior
management team together with a growing number of highly skilled
senior scientists.
Loss of key staff could lead to a delay in the Group's plans and
operations.
The Group aims to provide remuneration packages and working
conditions which will attract and retain staff of the required
level, informally benchmarking the level of benefits provided to
its staff against comparator companies.
Loss of facilities
Should the Group's facilities become damaged, the ability to
carry on development programmes and meet customer deadlines may be
affected.
The Group has recently relocated to purpose-built facilities in
both Wetherby and Cambridge and has business continuity plans in
place together with adequate insurance to cover any business damage
or interruption.
Key Performance Indicators
At this stage of the Group's development, the non-financial key
performance indicators focus around the development of the Affimer
technology and customer projects, together with the progress of the
first Affimer drug candidate into Phase I clinical trials. In
addition, the number of customers evaluating the Affimer technology
which may lead to commercial licensing agreements is seen as a
growing acceptance of the technology. Both of these are discussed
in more detail within the Operational Review.
The financial key performance indicators focus around three
areas:
- Group revenues
- Research and development expenditure, which is either expensed
through the Income Statement or capitalised
- Cash and short-term deposit balances
Alastair Smith Tony Gardiner
Chief Executive Officer Chief Financial Officer
3 October 2017 3 October 2017
Consolidated Income Statement for the year ended 31 July
2017
2017 2016
Note GBP000 GBP000
Revenue 2,735 2,165
Cost of sales (941) (895)
------------ ------------
Gross profit 1,794 1,270
Research and development
costs (2,597) (1,500)
Administrative expenses (7,178) (5,434)
------------ ------------
Operating loss (7,981) (5,664)
Financial income 88 99
------------ ------------
Loss before taxation from
continuing operations (7,893) (5,565)
Taxation 1,526 918
------------ ------------
Loss and total comprehensive
loss for the year attributable
to equity shareholders (6,367) (4,647)
------------ ------------
Loss per ordinary share:
- Basic and diluted 4 (9.31p) (6.86p)
------------ ------------
Consolidated Balance Sheet as at 31 July 2017
2017 2016
GBP000 GBP000
Non-current assets
Intangible assets 12,299 11,480
Property, plant & equipment 3,453 3,738
------------- -------------
15,752 15,218
------------- -------------
Current assets
Inventories 158 268
Trade and other receivables 1,277 1,128
Income taxes 1,200 1,418
Short term deposits 4,000 10,000
Cash and cash equivalents 9,166 9,521
------------- -------------
15,801 22,335
------------- -------------
Total assets 31,553 37,553
------------- -------------
Current liabilities
Trade and other payables (1,324) (1,357)
Contingent consideration (340) (340)
------------- -------------
Total liabilities (1,664) (1,697)
------------- -------------
Net assets 29,889 35,856
------------- -------------
Equity attributable to equity holders of the
Company
Share capital 6,917 6,915
Share premium 633 621
Capital reserve 1,899 1,899
Other reserve (1,729) (1,729)
Reserve for own shares (2,651) (2,651)
Retained earnings 24,820 30,801
------------- -------------
Total equity 29,889 35,856
------------- -------------
Consolidated Statement of Changes in Equity for the year ended
31 July 2017
Reserve
Share Share Other Capital for Retained Total
capital premium reserve reserve own earnings equity
shares
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------- ------------- ------------- ------------ ------------- ------------- -----------
At 1 August
2015 5,057 35,756 (1,729) 2,669 (1,590) (21,031) 19,132
Total transactions with owners, recorded directly
in equity:
Placing
net of
related
expenses 1,760 19,255 - - - - 21,015
Exercise
of share
options 8 76 - - - - 84
Share premium
cancellation - (55,437) - - - 55,437 -
Own shares
acquired 90 971 - - (1,061) - -
------------- ------------- ------------- ------------ ------------- ------------- -----------
1,858 (35,135) - - (1,061) 55,437 21,099
Total
comprehensive
loss for
the period - - - - - (4,647) (4,647)
Share based
payment
charges - - - - - 272 272
Transfer(1) - - - (770) - 770 -
------------- ------------- ------------- ------------ ------------- ------------- -----------
At 31 July
2016 6,915 621 (1,729) 1,899 (2,651) 30,801 35,856
------------- ------------- ------------- ------------ ------------- ------------- -----------
Total transactions with owners, recorded directly
in equity:
Issue of
shares 2 12 - - - - 14
------------- ------------- ------------- ------------ ------------- ------------- -----------
2 12 - - - - 14
Total
comprehensive
loss for
the period - - - - - (6,367) (6,367)
Share based
payment
charges - - - - - 386 386
------------- ------------- ------------- ------------ ------------- ------------- -----------
At 31 July
2017 6,917 633 (1,729) 1,899 (2,651) 24,820 29,889
------------- ------------- ------------- ------------ ------------- ------------- -----------
1 - The transfer of equity from the capital reserve to retained
earnings relates to share option warrants which expired.
Consolidated Statement of Cash Flows for the year ended 31 July
2017
2017 2016
GBP000 GBP000
Cash flow from operating activities
Loss for the year (6,367) (4,647)
Amortisation and impairment
losses 651 642
Depreciation 932 604
Loss on disposal of property,
plant and equipment 11 67
Reduction of contingent consideration - (443)
Equity settled share based
payment charges 386 272
Financial income (88) (99)
Income tax credit (1,526) (918)
------------- -------------
Operating cash outflow before
changes in working capital (6,001) (4,522)
Decrease in inventories 110 65
Increase in trade and other
receivables (125) (361)
Decrease in trade and other
payables (58) (80)
------------- -------------
Operating cash outflow from
operations (6,074) (4,898)
Finance income received 88 99
Income tax received 1,745 566
------------- -------------
Cash flows from operating
activities (4,241) (4,233)
------------- -------------
Cash flows from investing
activities
Purchase of plant and equipment (658) (2,863)
Development expenditure capitalised (1,470) (1,762)
Decrease/(increase) in balances
on short term deposit 6,000 (10,000)
------------- -------------
Net cash flow from investing
activities 3,872 (14,625)
------------- -------------
Cash flows from financing
activities
Proceeds from issue of shares 14 21,049
------------- -------------
Net cash flow from financing
activities 14 21,049
------------- -------------
Net (decrease)/increase in
cash and cash equivalents (355) 2,191
Cash and cash equivalents
at the beginning of the year 9,521 7,330
------------- -------------
Cash and cash equivalents
at the end of the year 9,166 9,521
------------- -------------
Notes to the unaudited preliminary results to 31 July 2017
1 General information
These preliminary results have been prepared on the basis of the
accounting policies which are to be set out in Avacta Group plc's
annual report and financial statements for the year ended 31 July
2017.
The consolidated financial statements of the Group for the year
ended 31 July 2017 were prepared in accordance with International
Financial Reporting Standards ("IFRSs") as adopted for use in the
EU ("adopted IFRSs") and applicable law.
The financial information set out above does not constitute the
Company's statutory financial statements for the years ended 31
July 2017 or 2016 but is derived from those financial statements.
Statutory financial statements for 2016 have been delivered to the
Registrar of Companies and distributed to shareholders, and those
for 2017 will be respectively delivered and distributed on or
before 1 December 2017. The auditors have reported on those
financial statements and their reports were:
(i) unqualified;
(ii) did not include a reference to any matters to which the
auditors drew attention by way of emphasis without qualifying their
report; and
(iii) did not contain a statement under section 498(2) or (3) of
the Companies Act 2006 in respect if the financial statements for
2016 or 2017.
2 Basis of preparation
The Group financial statements have been prepared and approved
by the Directors in accordance with International Financial
Reporting Standards as adopted by the European Union (IFRS).
The preparation of financial statements in conformity with IFRSs
requires management to make judgements, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from those estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both the current and future
periods.
The Group's activities, together with the factors likely to
affect its future development, performance and position are set out
in the Joint Chairman's and Chief Executive Officer's Statement and
Operational Review. The financial position of the Group, its
financial performance and its cash flows and liquidity position are
described there also and within the financial statements
presented.
Management prepares detailed working capital forecasts which are
reviewed by the Board on a regular basis. The forecasts include
assumptions regarding the status of customer development projects
and sales pipeline, future revenues and costs together with various
scenarios which reflect growth plans, opportunities, risks and
mitigating actions. The forecasts also include assumptions
regarding the timing and quantum of investment in the Affimer
research and development programme. Whilst there are inherent
uncertainties regarding the cash flows associated with the
development of the Affimer platform, together with the timing of
signature and delivery of customer development projects and future
collaboration transactions, the Directors are satisfied that there
is sufficient discretion and control as to the timing and quantum
of cash outflows to ensure that the Group is able to meet its
liabilities as they fall due for the foreseeable future.
The Financial Reporting Council issued "Going Concern and
Liquidity Risk: Guidance for Directors of UK Companies" in 2009,
and the Directors have considered this when preparing these
financial statements. These have been prepared on a going concern
basis, notwithstanding the loss for the period ended 31 July 2017.
The Directors have taken steps to ensure that they believe the
going concern basis of preparation remains appropriate, and that
the carrying value of intangibles remains supported by future cash
flows. The key conclusions are summarised below:
- The Group continues to develop its Affimer platform
technology. This is expected to generate significant revenues for
the Group over the coming years, aiding both profitability and cash
flows.
- As at 31 July 2017 the Group's short-term deposits and cash
and cash equivalents were GBP13.17 million (2016: GBP19.52
million).
- The Directors have prepared sensitised cash flow forecasts
extending to the end of the financial year ended 31 July 2019.
These show that the Group has sufficient funds available to meet
its obligations as they fall due into the 2019 calendar year.
- The Group does not have external borrowings or any covenants based on financial performance.
- The Directors have considered the position of the individual
trading companies in the group to ensure that these companies are
also in a position to continue to meet their obligations as they
fall due.
- There are not believed to be any contingent liabilities which
could result in a significant impact on the business if they were
to crystallise.
Following this assessment, the Directors have reasonable
expectation that the Group has adequate resources to continue for
the foreseeable future and that carrying values of intangible
assets are supported. Thus, they continue to adopt the going
concern basis of accounting in preparing these financial
statements.
3 Segmental Reporting
Operating segment analysis 2017
Life Animal
Sciences Health Total
GBP000 GBP000 GBP000
Sale of goods - 770 770
Provision of services 1,148 817 1,965
------------- ------------- -------------
Revenue 1,148 1,587 2,735
Cost of goods sold (423) (518) (941)
------------- ------------- -------------
Gross profit 725 1,069 1,794
Research and development
costs (2,266) (331) (2,597)
Administrative expenses (3,978) (1,263) (5,241)
------------- ------------- -------------
Segment operating loss (5,519) (525) (6,044)
Corporate and other
unallocated items ------------- ------------- (1,937)
-------------
Operating loss (7,981)
Finance income 88
-------------
Loss before taxation (7,893)
Taxation 1,526
-------------
Amount attributable
to equity holders of
the Company (6,367)
-------------
Life Animal
Sciences Health Total
GBP000 GBP000 GBP000
Segment intangible
assets 8,238 4,043 12,281
Segment other assets 5,407 392 5,799
------------- ------------- -------------
Segment assets 13,645 4,435 18,080
Corporate and other
unallocated items ------------- ------------- 13,473
-------------
Total assets 31,553
-------------
Segment liabilities (869) (222) (1,091)
Corporate and other
unallocated items ------------- ------------- (573)
-------------
Total liabilities (1,664)
-------------
Operating segment analysis 2016
Life Animal
Sciences Health Total
GBP000 GBP000 GBP000
Sale of goods - 674 674
Provision of services 704 787 1,491
------------- ------------- -------------
Revenue 704 1,461 2,165
Cost of goods sold (451) (444) (895)
------------- ------------- -------------
Gross profit 253 1,017 1,270
Research and development
costs (1,306) (194) (1,500)
Administrative expenses (2,671) (1,113) (3,784)
------------- ------------- -------------
Segment operating loss (3,724) (290) (4,014)
Corporate and other
unallocated items ------------- ------------- (1,650)
-------------
Operating loss (5,664)
Finance income 99
-------------
Loss before taxation (5,565)
Taxation 918
-------------
Amount attributable
to equity holders of
the Company (4,647)
-------------
Life Animal
Sciences Health Total
GBP000 GBP000 GBP000
Segment intangible
assets 7,481 3,999 11,480
Segment other assets 5,986 362 6,348
------------- ------------- -------------
Segment assets 13,467 4,361 17,828
Corporate and other
unallocated items ------------- ------------- 19,725
-------------
Total assets 37,553
-------------
Segment liabilities (946) (173) (1,119)
Corporate and other
unallocated items ------------- ------------- (578)
-------------
Total liabilities (1,697)
-------------
4 Earnings per ordinary share
The calculation of earnings per ordinary share is based on the
profit or loss for the period and the weighted average number of
equity voting shares in issue. The earnings per ordinary share are
the same as the diluted earnings per ordinary share because the
effect of potentially issuable shares is anti-dilutive.
2017 2016
Loss (GBP000) (6,367) (4,647)
--------------- ----------------
Weighted average number of
shares (number) 68,389,839 67,713,817
--------------- ----------------
Basic and diluted loss per
ordinary share (pence) (9.31p) (6.86p)
--------------- ----------------
- Ends -
This information is provided by RNS
The company news service from the London Stock Exchange
END
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